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Sex.com's story of theft and Intrigue Options · View
Posted: Sunday, May 27, 2007 3:43:01 PM

Rank: Matriarch

Joined: 12/6/2006
Posts: 29,148
The Internet's most famous domain name, and the subject of theft and millions of dollars, is now the subject of a book of the same name. Should be interesting.


Sex.com and a web of intrigue
Two men’s battle over a domain name shows how far the net has come
In a few weeks’ time a thickset middle-aged man with a ready smile and the gift of the gab will walk into a courtroom in San Jose, capital of California’s “silicon valley” and try to plead poverty before the judge.

The lawyers he will be facing will not believe him, and with good reason: over the past decade Stephen Michael Cohen has made hundreds of millions of dollars as the self-styled king of internet porn, a business worth globally some $57 billion.

It is not the pornography that has landed Cohen in court, but the theft of something with no physical existence. That something was a website, more precisely a domain name that a geeky 31-year-old called Gary Kremen registered back in 1994 simply because he could: sex.com. It turned out to be worth a fortune. Except that it was Cohen who made the fortune, and for more than 10 years Kremen has been fighting to get it back.

The case has cost millions of dollars, involved a trashed mansion, a phantom gunfight between bounty hunters, forgery and disappearing bank accounts and forever altered the development of the internet. Kremen vs Cohen finally established that property in cyberspace can be at least as valuable as in the real world.

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It seems like ancient history but it is barely a dozen years since the beginning of “the net” – when it was, in fact, scarcely a net at all, more a series of links between communications companies and university laboratories with computers.

The US military encouraged and developed these multiple links to ensure that in a nuclear strike, communications could be routed through one of many interlinked networks of computers.

This early net was an arid place of computer code with only a few bulletin boards and user groups featuring text, mostly in jargon. The idea that it would one day become a global mar-ketplace for music, movies and above all pornography was unimaginable.

Until, that is, a hyperintelligent nerd with a goatee beard, a degree in computer science and not much of a social life thought he might just have an idea.

Gary Kremen had mixed at Chi-cago and Stanford universities with the men who would go on to run Microsoft. He had built a career reselling software packages but he realised that one day people would advertise on the internet.

With remarkable prescience, in 1994 he set up a company to sell this new commodity: the online ad. Back then there were very few websites, and they were basically handed out free to anyone who asked. Nobody had yet figured out a way to make money from the internet. The answer, Kremen realised, was obvious. What would get people to look at online ads? In the same way old newspaper ads would read “SEX: now that I’ve got your attention . . .”

Kremen contacted Network Solutions and registered sex.com. It may have been free to set up, but he was about to make a very expensive mistake. He failed to set up the website.

So it was pure chance that on browsing the lists of domain names – as people like him did – one morning in September 1995 he discovered the registry for sex.com also included someone called Stephen Cohen.

Over the next four weeks – just as Network Solutions began charging for domains for the first time – all trace of his own connection to the domain name was disappearing. As Network Solutions started selling 10,000 dotcoms a month for $50 each, then 30,000 a month, then 100,000: overnight a billion-dollar industry was born.

Kremen was laughing, until he wondered why he wasn’t making more money from sex.com. His former colleagues had sold match.com for $8m. Slowly it dawned on Kremen that he no longer legally owned it. But the man who did was making a killing.

Cohen was 15 years older than Kremen, and no internet whiz-kid but a genius of a different kind. The child of a broken marriage in a wealthy Los Angeles Jewish family, Cohen flunked out of school and drifted into cheque-book fraud targeting shopkeepers.

On the side he took classes to learn the trades of private investigator and lawyer, not because he wanted to practise them but because he wanted to know the skills of the people he expected would soon be after him.

Obsessed with sex – he married five times while serially sleeping around – he set up a “swingers’ club” in conservative Orange County making $100,000 a year charging for membership. He had also set up a bulletin board called French Connection on this new internet, used by wife-swappers to arrange parties and exchange pornographic pictures.

When the web came along, Cohen too realised sex.com would be a good

thing. These were still the years BG – before Google – when people often typed whatever they were looking for into the address bar and followed it with the best-known suffix: .com.

When Kremen looked into what had happened to his domain he found it had become a membership site charging $25 a month. Banner adverts for other porn sites paid Cohen up to $45,000 a month. It was a licence to print money, on the back of which Cohen had acquired a San Diego mansion and a luxury lifestyle.

Cohen claimed to have had the sex.com “trademark” since 1979, even though the concept of .com was then unknown. In fact he had stolen it by forging a letter of renunciation from Online Classifieds, a separate company Kremen had used to register sex.com.

Kremen launched the most expensive battle in dotcom history: Cohen fought doggedly, obfuscating and prevaricating, forcing Kremen repeatedly to amend the charges against him.

Kremen had become rich through shares in booming dot.com startups. He sold out to pursue his case. The courts meanwhile argued whether a domain was really a property or just a “telephone number”, though they were now routinely changing hands for more than $3m. Cohen and Kremen had realised before the law that domains were the shopfronts for the biggest market the world had ever known.

In 2001, with virtually all his cash used up in the legal battle, Kremen finally won a judgment that awarded him $65m in damages. Cohen refused to pay, and fled to Mexico. He left Kremen with his mansion – an exclusive six-bedroom, eight-bath-room villa with a swimming pool – which he had trashed in spite, then spread the untrue story that Kremen had sent bounty hunters to bring him back. He finally turned himself in by accident in 2005 when he was arrested and handed over to US marshals when he attempted to renew his Mexican visa.

Kremen has sold sex.com for $12m but still owns sex.net and another 4,000 domain names. He still lives in Cohen’s house. With interest Cohen now owes Kremen $82m, but says he has nothing, and cannot explain where it has gone. “Follow the money,” may have been good advice in the 1970s; but in the tangled web of cyberspace, it’s no longer that easy.

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